Overview of the RegistrationProcess
Registrant Outreach Seminar
February 2014
Compliance & Registrant Regulation Branch
Disclaimer
The presentation is provided for general information purposesonly and does not constitute legal or accounting advice.
Information has been summarized and paraphrased forpresentation purposes and the examples have been providedfor illustration purposes only.
Information in this presentation reflects securities legislation andother relevant standards that are in effect as of the date ofthe presentation.
The contents of this presentation should not be modified withoutthe express written permission of the presenters.
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Compliance & Registrant Regulation Branch
Registration Regime
Ontario Securities Act sets up aninvestor protection regime
Standards relating to integrity,proficiency, and solvency
Must meet these standards• at time of initial registration, and• ongoing condition of registration
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Compliance & Registrant Regulation Branch
Presentation Overview
What’s new
Common filing deficiencies
NRD issues
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Compliance & Registrant Regulation Branch
Compliance and RegistrantRegulation Branch
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Director
Debra Foubert
Team 1
PortfolioManager
Team 2
InvestmentFund Manager
Team 3
Dealer
Team 4
RegistrantConduct
Team 5
ComplianceStrategy & Risk
Analysis
Team 6
Registration
Compliance & Registrant Regulation Branch
Team 6 - Registration
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Manager Registration
Kelly Everest
Registration Supervisor
(Portfolio Managers)
Allison McBain
Registration OfficersKamaria Hoo
Jenny Tse Lin Tsang
Pamela Woodall
Marsha Hylton
Registration Supervisor
(Investment FundManagers)
Oriole Burton
Registration OfficersFeryal Khorasanee
Rachel Palozzi
Kipson Noronha
Maria Aluning
Diana Cober
Toni Sargent
Registration Supervisor
(Dealers)
Kirsty MacDonald
Registration OfficersChristy Yip
Maria Talag
Edgar Serrano
Anthony Ng
Compliance & Registrant Regulation Branch
Registration Team – What We Do
Register, amend, suspend and revokeregistration of firms and theirrepresentatives
Often your first point of contact
Seek legal and compliance supportfrom Teams 1- 4 as required
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Compliance & Registrant Regulation Branch
On-line Forms and Electronic Filings
OSC Rule 11-501 –Electronic Deliveryof Documents to OSC
• Mandatory as of February 19, 2014• OSC’s web filing portal• Web based forms or PDFs
http://www.osc.gov.on.ca/en/SecuritiesLaw_forms_index.htm
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Compliance & Registrant Regulation Branch
Forms and Filings - Firms
Form Use this form to: Submission method
Form 33-109F6/ 33-506F6 FirmRegistration
•Apply for initial registrationas a dealer, adviser orinvestment fund manager•Apply to add a category orjurisdiction to an existingregistration
Complete form andsubmit a copy online.
PDF: Form 33-109F6PDF: Form 33-506F6
Form 33-109F3/ 33-506F3 BusinessLocations other thanHead Office
•Notify the OSC of theopening of, or any change to,a business location of the firm
NRD
Form 33-109F5/ 33-506F5 Change ofInformation
•Notify the OSC of a change topreviously submittedregistration information
Complete form andsubmit a copy online.PDF: Form 33-109F5PDF: Form 33-506F5
Insurance information•Notify the OSC of changes topreviously submittedinsurance information
Online Form
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Compliance & Registrant Regulation Branch
Forms and Filings – Individuals
Form Use this form to:Submissionmethod
Form 33-109F1/33-506F1Notice of Termination ofRegistered and PermittedIndividuals
•Notify the OSC of the termination of aregistered or permitted individual’s authorityto act on behalf of the firm
NRD
Form 33-109F2/ 33-506F2Change or Surrender ofIndividual Categories
•Apply for registration or approval in anadditional category•Surrender a category while maintainingregistration in one or more other categories
NRD
Form 33-109F4/ 33-506F4Registration of Individuals andReview of Permitted Individuals
•Apply for registration in individual categoriesor review as a permitted individual
NRD
Form 33-109F5/33-506F5Change of Information
•Notify the OSC of a change to previouslysubmitted registration information
NRD
Form 33-109F7/ 33-506F7Reinstatement of RegisteredIndividuals and PermittedIndividuals
•Transfer individual’s registration betweensponsoring firms or reinstate an individual’sregistration or a permitted individual status
NRD
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Compliance & Registrant Regulation Branch
Forms and Filings – Financial
Form Use this form to:Submissionmethod
Form 31-103F1Calculation ofExcess WorkingCapital
•Determine and notify the OSC of a firm’sexcess working capital as at the end of afinancial year or interim period
Online form
Financialstatements andother financialinformation
•Deliver required financial information to theregulators
Online form
SubordinationAgreements
•Notify the OSC that a firm has executed asubordinated loan agreement and relying onit for the purposes of Form 31-103F1
Online form
Repayment ortermination of asubordinationagreement
•Notify the OSC of a repayment of asubordinated loan or termination of asubordination agreement
Online form
Capital deficiency•Notify the OSC of a capital deficiency (i.e.excess working capital of a registered firm isless than zero)
E-mail [email protected]
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Compliance & Registrant Regulation Branch
Forms and Filings – ParticipationFees
Form Use this form to:Submissionmethod
Form 13-502F4/ 13-503F1ParticipationFeeCalculation
•Determine and notify the OSC of participationfees payable•All registered firms and unregistered exemptinternational firms must complete this form byDecember 1 each year•Unregistered investment fund managers onlymust complete this form within 90 days afterthe end of each of its fiscal years
Form 13-502F4:Online form
Form 13-503F1:Online form
AdjustedForm 13-502F4 andForm 13-502F5/AdjustedForm 13-503F1 andForm 13-503F2
•Determine and notify the OSC of adjustedparticipation fees payable. Firms who provideda Form 13-502F4 or Form 13-503F1 (above)based on estimated revenues must completethese forms electronically within 90 days oftheir fiscal year end only if their participationfee payable has changed
Adjusted Form13-502F4 andForm 13-502F5:Online form
Adjusted Form13-503F1 andForm 13-503F2:Online form
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Compliance & Registrant Regulation Branch
Forms and Filings - RegistrationExemptions
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Form Use this form to:Submissionmethod
Form 31-103F2Submission toJurisdiction andAppointment ofAgent for Service
•To notify the OSC of reliance on theexemption from the registration requirementunder sections 8.18 International Dealer and8.26 International Adviser of NationalInstrument 31-103 RegistrationRequirements and Exemptions
Complete theform andsubmit a copyonline.
Form 31-103F3 Useof MobilityExemption
•Notify the OSC of an individual’s reliance onan exemption from the registrationrequirement under section 2.2 Client mobilityexemption - individuals
Complete theform andsubmit a copyonline.
Form 32-102F1Submission toJurisdiction andAppointment ofAgent for Servicefor IFM
•Notify the OSC of reliance on the permittedclient exemption for international investmentfund managers under section 4 Permittedclients
Complete theform andsubmit a copyonline.
Compliance & Registrant Regulation Branch
Forms and Filings - RegistrationExemptions (cont’d)
Form Use this form to:Submissionmethod
Form 32-102F2 Noticeof Regulatory Action
•Notify the OSC of reliance on the permitted clientexemption for international investment fundmanagers under s. 4 Permitted clients
Complete formand submit acopy online.
Reliance on exemptionfrom IFM registrationunder MultilateralInstrument 32-102Registration Exemptionsfor Non-Resident IFMs
•Notify the OSC of reliance on the permitted clientexemption for international IFM under s. 4Permitted clients•Notify the OSC of the total assets undermanagement attributable to securities beneficiallyowned by residents of Ontario as at the mostrecently completed month•Unregistered international investment fundmanagers must complete this form by December 1each year
E-mail [email protected]
Form 35-101F1/35-101F2 Submission toJurisdiction andAppointment of Agent ofService of Process byAgents of the BrokerDealer
•To notify the OSC of United States Broker-Dealersand Agent’s reliance on the exemptions fromregistration under National Instrument 35-101Conditional Exemption from Registration for UnitedStates Broker Dealers and Agents
Complete formand submit acopy online.
Form 35-101F1Form 35-101F214
Compliance & Registrant Regulation Branch
Revised Service Standards –Individual Application
Effective spring 2014
Applies if:
• Routine (not novel)• Complete• Not associated with a new business
submission, and• No concerns with fitness for registration
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Compliance & Registrant Regulation Branch
Revised Service Standards –Individual Application (cont’d)
New applications and reactivations
• Dealing reps
• 5 working days for 80% of all filings
• ARs, AARs and CCOs
• 20 working days for 80% of all filings
Notices of termination (NOT)• 5 working days for 95% of all filings
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Compliance & Registrant Regulation Branch
Revised Service Standards – NewFirm
Effective spring 2014
Apply if:
• Routine (not novel)• Non-SRO applicant• All questions are answered with
sufficient detail• All regulatory obligations are met• No concerns with fitness for registration,
and• Timely responses to requests for
information
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Compliance & Registrant Regulation Branch
Revised Service Standards – NewFirm (cont’d)
Initial contact within 5 working days for95% of filings, including
• fee payment instructions and• notification that ready to accept
applications for "mind andmanagement"
Decision within 90 working days for80% of filings
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Compliance & Registrant Regulation Branch
Deficient Filings - Return ofIncomplete Applications
When applications are substantiallyincomplete. For example
• Required business corporation numbersnot obtained
• No audited financial statements• No auditor appointed, or• Firm is not prepared to file the individual
registration applications on NRD
Return the application without review
If application is re-filed, may requirethe filing fees to be paid again
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Compliance & Registrant Regulation Branch
Deficient Filings - Closing InactiveApplications
If no response to a request within 3weeks, application will be considereddormant
Notification asking for a status updatewithin 2 weeks
Closed if no response
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Compliance & Registrant Regulation Branch
Common FilingDeficiencies
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Compliance & Registrant Regulation Branch
Registration Regime
Ontario Securities Act sets up aninvestor protection regime
Standards relating to integrity,proficiency, and solvency
Must meet these standards• at time of initial registration, and• continuing condition of registration
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Compliance & Registrant Regulation Branch
Registration Regime – KeyLegislation
National Instrument (NI) 31-103Registration Requirements, Exemptionsand Ongoing Registrant Obligations
NI 33-109 Registration Information
National Policy 11-204 Process forRegistration in Multiple Jurisdictions
Multilateral Instrument 11-102 PassportSystem
OSC Rule 13-502 – Fees
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Compliance & Registrant Regulation Branch
Common Deficiencies – New FirmApplications
Incomplete applications
Accompanying individual applicationsnot ready to be filed
Insufficient detail about the firm'sproposed business activities andoperations
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Compliance & Registrant Regulation Branch
Common Deficiencies – New FirmApplications
CEO not applying as UDP
CCO does not meet proficiencyrequirements
Business corporation numbers notprovided for all relevant jurisdictions
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Compliance & Registrant Regulation Branch
Common Deficiencies – OngoingFirm Filings
F5s not filed within specified timeframes (generally required within 10days). For example,
• Firm/CCO contact information
• Civil disclosure
• Shareholder information
• Change of auditor
• Insurance information
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Compliance & Registrant Regulation Branch
Common Deficiencies – General
New firm has not obtained NOT fromprior firm
Reinstatement used when individual isnot eligible
Conflicts of interest not properlyassessed
Exemptive relief not requested/obtained for dual registration
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Compliance & Registrant Regulation Branch
Common Deficiencies - Individuals
Disclosure is insufficient, absent ormisleading
• Outside business activities (OBA)
• Financial disclosure (i.e. solvency)
• Proficiency
Disclosure is late
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Compliance & Registrant Regulation Branch
Common Deficiencies – Individuals(cont’d)
Disclosure is insufficient, absent ormisleading
• Circumstances of resignation ortermination
• Regulatory disclosure such as insurancelicensing
• Criminal charges and/or convictions• Civil or regulatory actions
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Compliance & Registrant Regulation Branch
Common Deficiencies - OutsideBusiness Activities (OBAs)
Current employment
OBAs
• Landlord/owner of apartment building• Tax planning• Holding company
Officer or director positions
Equivalent to officer/director positions
• Trustee• Admissions manager at retirement home
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Compliance & Registrant Regulation Branch
Common Deficiencies - OBADisclosure
Insufficient detail
Firm has inappropriately assessedactual or potential conflicts of interestand/or client confusion
Firm has provided insufficientexplanation addressing why no conflictsor client confusion exist
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Compliance & Registrant Regulation Branch
Common Deficiencies – IdentifyingHigh-conflict OBAs
Assess three factors:
• Position of influence (e.g., religiousleader)
• Position of authority (e.g., teacher orcity councilor)
• Potentially vulnerable clients ( e.g.,seniors)
Expect T&Cs in most cases restrictingtrading/advising for clients (and closefamily members) met through the OBA
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Compliance & Registrant Regulation Branch
Common Deficiencies – FinancialDisclosure
Failure to disclose (initial and ongoing)
Bankruptcy/consumer proposals
Unpaid debt over $5,000
Unsatisfied judgements
Garnishments
Requirements to pay (CRA)
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Compliance & Registrant Regulation Branch
Common Deficiencies – FinancialDisclosure
Individuals with current solvency issuescan only be registered with closesupervision T&Cs
T&Cs can be removed once solvencyissue disappears (after F4 is updatedand supporting documents provided)
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Compliance & Registrant Regulation Branch
Common Deficiency - Bankruptcy
If not discharged, registration will berefused for a new applicant
If discharged within the last 12 months,close supervision T&Cs will be imposedfor six months
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Compliance & Registrant Regulation Branch
Common Deficiencies - Late Filings
For not meeting deadlines to notify usof changes in registration information
In particular, we see numerous latefilings relating to terminations, OBAs,and criminal, civil and financialdisclosure
NI 33-109 sets out the deadlines forthese and other filings
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Compliance & Registrant Regulation Branch
Common Deficiencies - Late Filings(cont’d)
Result in late fees of $100 per businessday (to annual maximum of $5,000 perfirm)
Best practices:
• File NOTs quickly after registered/permitted individual leaves firm
• New OBA does not begin until approvedby firm
• Registered/permitted individuals signannual attestation that all F4information is correct
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Compliance & Registrant Regulation Branch
Common Deficiencies - Proficiency
Proficiency Requirements set out in Part3 of NI 31-103
• Education (examinations ordesignations)
• Experience• Proficiency Principle
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Compliance & Registrant Regulation Branch
Proficiency - Education
Qualifying courses/designations
Time limits on examinationrequirements• Passed exam within last 36 months unless:
• registered in same category (in any jurisdiction inCanada) in last 36 months, OR
• gained 12 months of relevant securities industryexperience during the last 36 months
• does not apply to CIM and CFA designations
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Compliance & Registrant Regulation Branch
Common Deficiency – Education
Required courses not completed withinrequired time limit or at all
No exemption application nor anyindication of how the individual mightqualify under section 3.3(2)( b)
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Compliance & Registrant Regulation Branch
Proficiency - Experience
Section 3.3(2)(b) – where time limithas passed for courses
• Must have relevant securities industryexperience (to the category beingapplied for). For example,
• EMD dealing rep has experience withexempt products
• CCO has experience in supervisorycapacity in securities industry
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Compliance & Registrant Regulation Branch
Experience – AR and AARs
Relevant Investment ManagementExperience
• Refer to CSA Staff Notice 31-332Relevant Investment ManagementExperience for Advising Representativesand Associate Advising Representativesof Portfolio Managers
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Compliance & Registrant Regulation Branch
Experience - CCOs
CCOs of Portfolio Managers andInvestment Fund Managers
• Relevant securities experience• Worked in a compliance capacity• Provided professional services in the
securities industry
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Compliance & Registrant Regulation Branch
Experience - Common Deficiencies
Insufficient information and analysisprovided to assess whether theindividual has relevant experience
• Describe duties and responsibilities indetail
• Explain how they are relevant to thecategory being applied for
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Compliance & Registrant Regulation Branch
Experience – Common Deficiencies
Information provided on duties isexaggerated or otherwise not entirelyaccurate
• Firm obligation to make reasonableefforts to ensure truth andcompleteness
• It is an offence if an individual givesfalse or misleading information
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Compliance & Registrant Regulation Branch
Proficiency – Exemption Applications
Required where applicant does not haverequired courses or experience and3.3(2)(b) does not apply
Filed over NRD: with supportingdocuments sent electronically in pdfformat
Qualifications or Relevant Experiencethat is equivalent to, or moreappropriate in the circumstances than,the prescribed requirements
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Compliance & Registrant Regulation Branch
Common Deficiency - ProficiencyExemptions
Insufficient relevant information andanalysis
Overly focused on what the firm doesor what the team does
No comparative analysis of alternativecourses to the requiredcourses/designations
Information provided on duties andresponsibilities is exaggerated orotherwise not entirely accurate
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Compliance & Registrant Regulation Branch
Proficiency - General Principle
Section 3.4 of NI 31-103
Applies both at initial registration andat all times throughout registration
Responsibility of the registered firm toensure individuals are proficient at alltimes
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Compliance & Registrant Regulation Branch
General Proficiency Principle –Individual
Must have education, training andexperience that a reasonable personwould consider necessary to performactivity competently
• Includes understanding
• structure
• features, and
• risks
of each security recommended
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Compliance & Registrant Regulation Branch
General Proficiency Principle - CCO
Education, training and experience thata reasonable person would considernecessary to perform responsibilitiescompetently
Includes good understanding of theregulatory requirements
Knowledge and ability to design andimplement an effective compliancesystem
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Compliance & Registrant Regulation Branch
NRD issues and otherinformation
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Compliance & Registrant Regulation Branch
NRD – Password Issues
Chief AFR
• only CSA Service Desk can reset password• Chief AFR must know PIN• if Chief AFR has lost/forgotten PIN –
contact OSC
Other AFRs
• CAFR/AFR administrator can resetpassword
Individual applicants (not yet registered)
• individual user ID/password must bedisabled in order to reset
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Compliance & Registrant Regulation Branch
NRD – Issues with Firm Filings
NRD does not allow most firmfilings/updates. For example,
• Does not allow firm to add category• Does not allow you to add jurisdiction
to firm's registration• Name change• Address change
File F5 via pdf and submit electronically– we will update NRD
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Compliance & Registrant Regulation Branch
NRD – Firm Submissions
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Compliance & Registrant Regulation Branch
NRD – How to Submit NewIndividual Application
Use one of 4 submission types forindividual new to firm
Described on NRD System and in Rule33-109
• Initial• Reactivation• Reinstatement• Add sponsoring firm
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Compliance & Registrant Regulation Branch
Individual Application – Initial Types
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Compliance & Registrant Regulation Branch
NRD – How to Submit NewIndividual Application (cont’d) Must use existing NRD number, if already
assigned
Warning may mean that they have an NRDnumber or may mean that they havepreviously applied
Staff can only disclose NRD number directly toindividual
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Compliance & Registrant Regulation Branch
Another Individual - Same Nameand Birth Date
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Compliance & Registrant Regulation Branch
Individual Application –Amendments
Compliance & Registrant Regulation Branch
NRD – Passport/Non-Passport Filings
Check “Passport” if individual is:
• Applying for registration in multiplejurisdictions
• Adding one or more jurisdictions
Don’t check “Passport” if individual is:
• Applying for registration only in their PRjurisdiction
• Filing only as a Permitted Individual(See 4A.1 – 11-102CP)
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Compliance & Registrant Regulation Branch
Passport/Interface Selection
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Compliance & Registrant Regulation Branch
NRD – Navigation/SubmissionIssues
Information not complete – Redmessage will appear at top of screen
• Often section 8.4 not complete re:relevant securities industry experience
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Compliance & Registrant Regulation Branch
NRD – Navigation/SubmissionIssues (cont’d)
Compliance & Registrant Regulation Branch
NRD – Navigation/SubmissionIssues (cont’d)
To ensure all is complete
• Use “Continue” or “Save and Continue”button at the bottom of screen
To skip to new screen
• Use local navigator (panel on left ofscreen will allow you to jump to adifferent section)
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Compliance & Registrant Regulation Branch
NRD – Navigation/SubmissionIssues (cont’d)
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Compliance & Registrant Regulation Branch
NRD – Finding and TrackingSubmissions Work In Progress
• Submission may have been created byanother AFR and in their WIP
• We cannot see this
• CAFR/AFR Administrator may reassign
Sent to Regulators
• No longer showing in your WIP
Returned to firm
• Returned to AFR’s WIP to correctdeficiencies
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Compliance & Registrant Regulation Branch
NRD - Submission History
Current statuses on all submissions
• Submitted• Approved• Withdrawn• Denied
Additional statuses on notices
• Pending acknowledgement• Acknowledged
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Compliance & Registrant Regulation Branch
NRD - Submission History
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Compliance & Registrant Regulation Branch
NRD – Resubmit Fee Payment
Compliance & Registrant Regulation Branch
NRD – Resubmit Fee Payment(cont’d)
Correct Default EFT Payment
•Use to resubmit fees that wererejected/returned (e.g. NSF)
•Will accumulate all rejected/returnedfees until paid
•Will resubmit all rejected/returnedfees to parties originally specified
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Compliance & Registrant Regulation Branch
NRD – Resubmit Fee Payment(cont’d)
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Compliance & Registrant Regulation Branch
NRD – Resubmit Fee Payment(cont’d)
Use to submit fees where NRD does notautomatically pull fees, e.g. exemptionapplications or late fees
Must specify each jurisdiction andamount
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Compliance & Registrant Regulation Branch
NRD – Resubmit Fee Payment(cont’d)
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Compliance & Registrant Regulation Branch
NRD – Annual Fee Exclusion
Ensures firm not charged annual feesfor individuals surrendering/terminatingby Dec 31st
One submission for multiple individuals
Per jurisdiction basis
Can be reversed
Must be filed by 3:00 pm Dec 31st
NOT must be filed within 10 days ofactual termination date
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Compliance & Registrant Regulation Branch
NRD – Annual Fee Exclusion (cont’d)
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Compliance & Registrant Regulation Branch
NRD – Reports
Compliance & Registrant Regulation Branch
NRD Transition
New CSA service desk in Moncton, NB
• 1-800-219-5381 (Unchanged)
NRD Forms
• NRD Form 1 - ENROLMENT OF FIRM• NRD Form 2 - ENROLMENT OF CHIEF AUTHORIZED
FIRM REPRESENTATIVE• NRD Form 3 - NRD (BANK) ACCOUNT HOLDER
AUTHORIZATION• Available under NRD HELP (Enrolment Forms)• Forms contain instructions and where to send them
No HST on NRD system fees
Two transition issues
• Session times out prematurely• Slow to search
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Compliance & Registrant Regulation Branch
Recap
What’s New
• Registration Team• Online forms and filings• Revised service standards
Common Filing Deficiencies
• Some examples provided• More information in CRR annual
summary reports
NRD Issues
• NRD Help (on top right corner of NRD)
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Compliance & Registrant Regulation Branch
General Inquiries
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Local (Toronto)
Toll-free (North America)
TTY
Fax
416-593-8314
1-877-785-1555
1-866-827-1295
416-593-8122
Compliance & Registrant Regulation Branch 80
Questions?
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